Florida Trend: Webcam Warrior Tackles Yahoo
Eric Jackson takes up the role of small-investor activist.
Published 8/1/2008 in Florida Trend
by Mike Vogel
The emergence of a phenom is usually associated with an individual moment. In the case of Eric Jackson, online shareholder activist, his moment came with Yahoo on a Sunday morning a few days after New Year’s Day 2007 in the guest bedroom of a condo he rents overlooking the Gulf north of Naples.
Staring into a $30 webcam he bought at Office Depot, Jackson videoed his case against Yahoo’s management in a seven-minute and 33-second speech that was as crisp as the part in his hair. He rose early on that Sunday so that he could make the video while his wife was still asleep; he was self-conscious about doing it in front of her.
Jackson, who owned all of 45 Yahoo shares, certainly picked the right moment — and not just to avoid his wife’s eye. His viral campaign against Yahoo, launched when he posted his video on YouTube, fed into the online and business news zeitgeist and transformed him from an unread blogger to a minor media figure with his own investment fund.
Jackson, 36, a Toronto native, got his start out of college at his father’s business, Jackson Leadership, a Toronto-based consulting firm that advises companies on succession planning, building management teams and so on. Going on to Columbia University for a doctorate in business, he and professor Donald Hambrick wrote one of the first studies of whether corporate “good governance” ideas correlated with better performance. (They found that only one mattered: Whether board members made significant purchases of their own company’s stock.) Along the way, Jackson took an interest in activist investment firms and the Carl Icahns of the world.
Jackson is “very sharp, intellectually vibrant” and interested in application more than theory, says Hambrick. In 2000, Jackson went on to become an executive with a Toronto tech startup, VoiceGenie, then rejoined his father in 2004. Two years later, Jackson, now president of the firm, moved his family to Naples.
To help his consulting business, he started a blog, breakoutperformance.blogspot.com. It drew only a couple of readers a day, but Jackson knew he was on to something in 2006 when that number jumped to 1,000 after he offered an opinion on Yahoo. He studied the company and decided it was ripe for improvement through activism. But he lacked Icahn’s money and name recognition, along with the institutional investors who can assemble the 1% to 10% of a company’s shares it typically takes to get leverage on a target. Armed with his idea of online, mass activism, he bought his webcam and 45 shares and hit the internet.
Jackson mounted his campaign as Yahoo ran up a series of poor quarterly results and missed opportunities while Google was making gains. It also came just over a year before Microsoft made public its bid for the company and almost a year and a half before word got out that Carl Icahn was buying up shares and proposing his own board slate.
Unlike disgruntled shareholders who grouse on message boards, Jackson offered a vision he named “Plan B” and allowed shareholders to pledge their support. He utilized YouTube, his blog, Wikia and YouChoose.net, a Thornton, Pa., startup that contacted him and suggested he use its site to gather results. His campaign, with 148 people pledging, would make it the fourth-most popular, as measured by number of signers, in YouChoose’s business category. (The overall winner, with more than 23,000 signers, is a campaign to get the TV show “Supernatural” renewed for a fourth season.)
A symbiotic relationship with the media followed. He appeared on CNBC with Maria Bartiromo, Fox’s Neil Cavuto and on the “CBS Evening News” and attracted coverage in the Wall Street Journal, the New York Times and elsewhere. In Jackson, the talking heads found an articulate shareholder, speaking earnestly about being constructive but with the wit to describe a particular board decision as “Ya-hubris.” Jackson was quite willing to accommodate their needs, even driving to Fort Lauderdale for a studio link to New York.
Jackson also telephoned large institutional shareholders for support. At least one, though not for public attribution, says Jackson is a “real advocate for shareholders.” The proxy voting advice service ISS/RiskMetrics included coverage of Jackson’s plan in its briefing report for Yahoo stockholders. By the time he flew to San Francisco for Yahoo’s 2007 annual meeting, he could claim 2.1 million in pledged shares behind him — two-tenths of 1% of Yahoo’s shares.
In the Q&A session with investors, Jackson had a public dustup with Yahoo CEO Terry Semel. Six days later, Semel was out. His compensation had been criticized, and board members up for re-election had gotten relatively little support in the proxy voting. Jackson sees cause and effect: “I was the outspoken shareholder.”
Yahoo was under stress from many directions. Still, Jackson “was a significant part of the pressure,” says Charles Elson, a University of Delaware professor and authority on corporate governance who has known Jackson since Jackson’s Columbia days.
Eager to show that his Yahoo gambit wasn’t a fluke, Jackson bought 130 Motorola shares and launched a second, less successful campaign. Among the user comments on wsj.com’s coverage is this exchange: “He’s simply a self-promoting wind bag. 130 shares? When he gets to 13,000 maybe he earns the right to feign interest in turning Motorola around,” wrote a user named Cato. Responded a user named Steve: “Self-promoting? Yes, but nonetheless, 1 share gives you a voice, and if his motives are genuine, then it is a good thing.”
Jackson decided to start his own investment fund using a model he developed for identifying overlooked, undervalued small companies. He raised “under $10 million” from family and friends and in February founded Ironfire Capital out of his Naples condo. In an interview on the veranda of the condo beach club, Jackson comes across as far from egomaniacal. Tall, he’s more animated and funnier than the reserved talking head of his YouTube postings.
Jackson says he’ll use activism to push his picks along. “At the end of the day, I’m still a guy who’s going to use the web,” he says. He’s made only two of his first 14 picks public: Barnwell Industries, a Honolulu hodgepodge of businesses that gets most of its revenue from a Canadian oil and gas operation, and GeoEye, a Dulles, Va., space satellite company. Executives at both companies, and Yahoo and Motorola, didn’t respond to requests for comment or declined to comment.
Neither small company is likely to generate the media interest to which he’s become accustomed. “If no one pays attention from CNBC, that’s fine,” Jackson says. “I’m not doing Ironfire to be in the press. I’m doing it to make money for the people who invest.”
Jackson reckons his whole Yahoo campaign — the webcam, plane tickets and hotel for the annual meeting — came to just $2,000. Given the low cost, the ease of online tools and virtual organization, Jackson likely is a pioneer in a field experts expect to grow. Says Jackson’s academic mentor Hambrick, now at Penn State University, “The whole issue of viral and grass-roots influence in all facets of social and economic life is going to mount, and woe be unto the big guys who don’t understand that.”
